Dorsey Company manufactures three products from a common input in a joint proces

Question

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $95,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:

     Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:

5

  

Compute the incremental profit (loss) for each product.

      

Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Which product or products should be processed further? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $95,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:

Explanation / Answer

let us first calculate the profit after allocation processing cost of $95,000 as per sales value of product A,B,C,

the calculation are shown below

now we will calculate the profit after further processing

now we will calculate incremental income which is profit after further processing minus profit before further processing , if the value is negative it is loss and vice versa if it is positive means it is profit

b ) As product is showing incremental loss after further processing it is better to sell at splitt off point

c) As product B and product C is showing incremental profit it is advised to for further processing

Calculation of profit before further processing products qty produced selling price Total sales allocation % processing cost allocated profit A 15000 4 60000 26.55 25222.50 34777.50 B 20000 5 100000 44.25 42037.50 57962.50 C 6000 11 66000 29.20 27740.00 38260.00 Total 226000 100 95000 131000

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